On March 15, 2010, the Securities and Exchange Commission approved Nasdaq's proposed rule change to modify its requirements pertaining to public disclosures by listed companies.  In an effort to eliminate duplicate disclosures, the Nasdaq rule change will allow companies to make a public announcement by filing a Form 8-K, where required by SEC rules, or by issuing a press release.

The approved rule change became effective on March 15, 2010 and includes the following:

    • Going Concern Qualification.  Nasdaq eliminated the requirement, previously found in Rule 5250(b)(2), that a company issue a press release announcing the receipt of an audit opinion that expresses doubt about the ability of the company to continue as a going concern.  Nasdaq reasoned that a press release about a company's receipt of a going concern opinion is unnecessary because the company must include the audit opinion in its annual filing with the SEC and the annual filing must be distributed or made available to shareholders under the SEC's proxy rules and the Nasdaq listing rules.  Nasdaq has indicated, however, that if a company fails to include the audit opinion in its annual filing, Nasdaq will consider the filing deficient and move to delist the company.
    • Listing Deficiency; Delisting Notice; Public Reprimand Letter.  Modifications to Rules 5250(b), 5810(b), 5840(k) and IM-5810-1, which require disclosure of notifications regarding a company's noncompliance with listing standards (e.g., failure to meet Nasdaq's $1.00 minimum bid price requirement), initiation of delisting proceedings or receipt of a public reprimand letter, generally allow the company to make a public announcement by filing a Form 8-K, where required by SEC rules, or by issuing a press release.  Because Form 8-K Item 3.01 mandates disclosure of these same events, a company will have the option of filing only the Form 8-K instead of filing both a Form 8-K and issuing a press release.  However, under the amended Nasdaq rules, a company that receives a deficiency notice or staff determination letter related to the late filing of a required periodic report with the SEC must issue a press release (in addition to filing the Form 8-K).
    • Exception to Shareholder Approval Requirement. Amended Rule 5635(f) permits either the filing of a Form 8-K, where required by SEC rules, or the issuance of a press release when a company receives an exception to the Nasdaq shareholder approval requirements because compliance would jeopardize the company's financial viability. The press release or Form 8-K must be filed promptly and no later than ten days before the issuance of the securities in reliance on the exception. In addition to a Form 8-K or a press release, the company must still provide notice to shareholders by mail at least ten days before issuing securities in reliance on this exception. Currently, the SEC rules do not require the filing of a Form 8-K when a company receives an exception to the shareholder approval requirements. However, based on an informal discussion with Nasdaq's Office of General Counsel, we understand that if a company is required to file a Form 8-K in connection with the transaction giving rise to the shareholder approval requirement (where, for example, the company enters into a material definitive agreement relating to the transaction), the company may satisfy the Nasdaq disclosure requirement by disclosing receipt of the exception to the shareholder approval requirement in the same Form 8-K. Companies should consult with their counsel to determine whether the filing of a Form 8-K will satisfy the Nasdaq notification requirement in these circumstances.
    • Notification to Multiple Nasdaq Departments.  Rules 5810(b) and 5840(k), which previously required companies to notify multiple Nasdaq departments before issuing disclosures, now eliminate multiple notifications and require companies to notify only Nasdaq's MarketWatch Department.  The MarketWatch Department will notify other Nasdaq departments of the disclosures when necessary.
    • Foreign Private Issuers.  Amended Rule 5250(c)(2) requires a company that is a foreign private issuer to disclose interim financial results on a Form 6-K, instead of both on a Form 6-K and in a press release.

The SEC notes that, in those cases where SEC rules do not require the filing of a Form 8-K, Nasdaq rules still require an issuer to make public disclosures through a press release.

Additional Information

This Update is only intended to provide a general summary of Nasdaq's rule change.  Read the full text of the SEC's release at http://www.sec.gov/rules/sro/nasdaq/2010/34-61713.pdf.  


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